Financial Times

Global crisis dragging down poor countries

The global financial crisis is threatening to drag poor countries which contributed little to create the crisis, back to the days of deprivation of the past. Secretary to the Ministry of Foreign Affairs Palitha Kohona, speaking at a high level forum on challenges facing the South Asian region at the Asian Development Bank (ADB) in Manila, the Philippines this week, said the effect of these challenges threatens the political and economic stability and efforts to strengthen institutions, in particular the strengthening of democratic institutions.

Stressing the need to continue development, restoring credit, maintaining or increasing financing levels and focusing on development needs, Dr. Kohona suggested that there should be a temporary moratorium on the debt repayments of developing countries which far surpass development assistance. Dr. Kohona said the domino effect of the global economic crisis created in the financial centres of the developed world, has already had its impact on liquidity, availability of credit, trade flows, production, the service sectors and employment levels of the economies in the region.

“Most export dependent economies of our region have been severely affected,” he said. “Tourism has begun to lose its lustre. Industries of our region have started to lose their vigour. Unemployment that had been successfully managed so far, is emerging as a serious concern with wide social ramifications, especially for women. A region that has grown consistently has begun to feel the cold chills of slow growth, a paucity of credit, a lack of confidence and a fear of the future.”

Dr. Kohona described the one trillion dollar package of measures agreed by the G20 as “a welcome step in the right direction” but noted that much of the rescue packages being implemented by the developed countries are designed to rescue themselves. He pointed out that if the developing world is also not rescued at the same time, the rescued developed economies will have fewer markets to trade with and will result in bringing the situation back to square one. “Protectionism must not be allowed to raise its head, even for a short while.”

Dr. Kohona said terrorism is also affecting all countries in the region to some extent or other. “My country has been the victim of brutal terrorist attacks by an organization that refined terrorism to a fiendishly vicious art. Terrorism has stunted our growth, destabilized our social cohesion, brutalized our societies and negatively impacted on our social service network. Recognizing its importance, terrorism has made the economy a key target. Scarce resources have had to be diverted to counter the menace. Adding to the worries of our state institutions, it has branched out to drug running, arms and human trafficking, money laundering and a range of other illegal activities.”

Dr. Kohona said the Asian region has a critical role to play in countering the menace. “We must move beyond narrow bilateral concerns and boldly adopt wider measures for developing effective solutions to this regional and global threat. Terrorism has evolved trans-national linkages and multi- dimensional security challenges to our region and cannot be successfully addressed in isolation by individual countries. It is important to take a comprehensive and holistic approach to root out terrorism in terms of both individual and joint measures.” Dr. Kohona added that democracy must be firmly supported and upheld while defeating terrorism.

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